9.1 Insolvency Procedures Flashcards
(113 cards)
1
Q
What insolvency procedure protects goodwill
A
Administration
2
Q
What is Ds statutory declaration for MVL
A
C will repay debts within X period
3
Q
How many ways to prove insolvency for compulsory liquidation
A
Four
4
Q
Sixth stage in IP
A
Floating charge creditors
5
Q
895 - 901 CA on what
A
Scheme of arrangement
6
Q
When can fixed charge holder appoint receiver
A
In circumstances set out in security doc
7
Q
What does a company voluntary arrangement do
A
Imposes fixed timetable to repay, or if rescue impossible, to achieve better asset realisation on winding up
8
Q
Where are the statutory grounds for compulsory liquidation
A
122 IA
9
Q
What do all kinds of liquidation lead to
A
Dissolution
10
Q
What must the BS show for MVL
A
That assets exceed liabilities
11
Q
What must Ds confirm in a report for CVA
A
It has RP of being (i) approved by 75% of all creditors, representing more than 50% unconnected and (ii) successfully implemented
12
Q
What is an ‘unconnected creditor’ for the purposes of a CVA
A
Not D/CP/significant creditor
13
Q
What is the prescribed part
A
A percentage taken out for unsecured creditors
14
Q
What is a FCR the receiver of
A
Only of property charged
15
Q
When are there disclosure requirements for insolvency and what are they
A
If goes into A, must publicise and put on stationery
16
Q
Negative of pre-pack A
A
Poor recovery for creditors as buyer will cherry pick
17
Q
Two kinds of receivers
A
Fixed charge and administrative
18
Q
Member resolutions required for MVL
A
SR for MV + OR to appoint L
19
Q
What kind of liquidation is out of court
A
Members and creditors voluntary
20
Q
What procedure applies to scheme of arrangement - how is the arrangement put into place
A
Sanctioned by the court
21
Q
Which is not an officer of the court - A or L
A
L
22
Q
Third in insolvency priority
A
Other costs of L
23
Q
When does the appointment of A terminate automatically
A
After 1 year
24
Q
1 - 7 IA on what
A
Company voluntary arrangement
25
When will a company voluntary arrangement be used
If company trying to trade out of difficulty
26
What is the procedure for compulsory liquidation
Petition to court on statutory ground
27
What is taken off the cash distributed to FC creditors in insolvency
Costs of preserving/realising fixed charge assets
28
Procedure for MVL
Ds statutory declaration + Ms paid in full
29
What is the only forma insolvency arrangement available if company does not have 100% agreement to e.g. extend maturity date on loans
Scheme of arrangement
30
Example of preferential debts
Wages owed to employees
31
What kind of liquidation requires court
Compulsory
32
When can QFCH appoint A
Schedule B1 para 14 IA and if charging doc states so applies
33
What are the duties of liquidator
De facto agent of C
34
Two usual grounds of compulsory liquidation
Insolvency or just and equitable
35
What is the benefit of a CVA over an SoA
No court involvement, so cheaper
36
Why might a members voluntary liquidation be used
Commercial/tax reasons
37
Is there a moratorium whilst in AR
No
38
What formal arrangement requires court sanction
Scheme of arrangement
39
Why must Ds be able to recognise insolvency situation
They can be personally liable (under IA), BoD (172(3) CA) and be disqualified (CDDA)
40
How do fixed and floating charge creditors rank
In order of creation, if properly registered
41
What is a consensual agreement
Adjust terms of debt to be beneficial to debtor
42
Who is at the very bottom in the list of priority in insolvency of company
Ms
43
What is liquidation
Sale of assets piecemeal
44
Where are the powers of AR
In debenture + Schedule 1 IA
45
What is a QFCH
Qualifying floating charge - can appoint A
46
What powers does FCR have
As in security doc + LPA '25
47
Two ways to appoint an administrator
Out of court or by court order
48
What is the period in which a creditor can challenge a CVA
28 days
49
Why is liquidation normally after A
No moratorium in liquidation + L limited powers to keep trading
50
What is a moratorium
Creditors cannot exercise rights/remedies
51
Three people who can appoint A out of court
Ds, Ms and QFCH
52
How do you document a consensual agreement
In restructuring agreement w/ contractual force
53
Particular power of A in Schedule 1 IA
Power to carry on business
54
What is a pre-pack administration
Business sale organised prior to A formally being appointed
55
When can A pay dividend to unsecured creditors
Court permission, or if paying to secured - comes out of prescribed part
56
Two formal insolvency arrangements under statute
Scheme of arrangement and company voluntary arrangement
57
Where are the powers of A
Schedule 1 IA '86
58
Is CVA under CA or IA
IA
59
First to consider in insolvency priority
Costs of preserving/realising fixed charge assets
60
What insolvency procedure imposes a moratorium
Administration
61
What is the order of priority in insolvency subject to
Subordination agreements and proper registration
62
When can an AR be appointed
QFCH created before 15/09/2003 + terms confer right
63
Why is CVA alone unlikely to guarantee success
It is usually part of wider restructuring - it is insufficient in itself, as it just imposes a new timetable to repay the same debts
64
When might an interim moratorium be used
If notice of intention to appoint A filed at court
65
Does a moratorium restrict the rights of QFCH to appoint A
No
66
Why does M's nomination of L for CVL not really count
Ds must ask creditors within 14 days to approve/nominate their own - this takes precedence
67
What formal arrangement under statute binds all creditors
Scheme of arrangement
68
What are the powers of liquidator
Extensive, including claw back provisions and distributing assets
69
Three people who can appoint A by court order
C, D an M
70
What percentage of creditors have to agree to company voluntary arrangement (NV)
75% of all, and more than 50% unconnected
71
Three kinds of liquidation
Compulsory, voluntary members, and voluntary creditors
72
What M resolution to approve CVA
OR
73
What creditors need to agree for scheme of arrangement
3/4 in value and majority in number
74
How can appointment of A be extended
By creditors for up to 1 year, and court for any further time
75
Member resolutions required for CVL
SR for CVL + OR to nominate L
76
Where are the four ways to prove insolvency for compulsory liquidation
123
77
Why is recovery less in liquidation than for A
Sale of assets piecemeal rather than sale as going concern
78
What is the final stage in IP
Shareholders
79
Why is a CVA cheaper than SoA
No court involvement
80
What are the duties of A
Agent of C and officer of court
81
Who usually applies for compulsory liquidation and why
Unsecured, as QFCH can appoint A + FC can enforce
82
Who usually appoints an administrator out of court
QFCH or Ds
83
Is A still officer of court even if appointed out of court
Yes
84
Is scheme of arrangement under CA or IA
CA
85
What is a benefit of pre=pack A
Preserves goodwill
86
What happens if security is insufficient for secured creditors debt owed - can they take out of PPF?
Cannot take out of prescribed part fund
87
What key power does an LPA receiver not have
Power of sale
88
Fourth in IP
Preferential debts
89
Second in insolvency priority
Fixed charge creditors
90
Relevant date for QFCH to appoint AR
Before 15/09/2003
91
Seventh stage in IP
Unsecured creditors (ADD PRESCRIBED PART BACK IN)
92
Why is an AR preferable
Only owes duty to the appointer
93
What is the downside of CVA over SoA
CVA only binds unsecured, unless secured are unanimous in consenting
94
How do you work out how many p/£1 owed unsecured creditors get
Left/owed x 100
95
Who has the effective control of CVL
Creditors
96
What is the downside of a consensual agreement
Unlikely to reach agreement w/ all creditors
97
How are creditors paid in liquidation
Proportionate to claim
98
Who can pay dividend - A/L, usually?
L, not A
99
What is the stage after unsecured creditors in IP
Interest on unsecured debts
100
What is the first step in CVA
Ds formulate written proposal + nominate LIP as 'supervisor'
101
When does MVL convert into CVL
If company becomes unable to pay debts within period in D's statutory declaration
102
What formal arrangement do Ms have to approve and how
CVA - by OR
103
What happens if no creditor challenges CVA
Binding and LIP will implement
104
Why might company need to go into administration before company voluntary arrangement
To stop creditors taking hostile action between CVA notice + procedure
105
What are the 3 objectives to administration
Rescue going concern, achieve better result for Cs, and realise property to distribute
106
What the insolvency procedure where the business continues trading and is sold as a going concern
Administration
107
Which formal arrangement imposes a fixed timetable to repay, or aims to achieve better asset realisation on winding up
Company voluntary arrangement
108
What kind of insolvency procedure is a contract based compromise - is not formal insolvency
Consensual agreement
109
Fifth stage in IP
MINUS the prescribed part (to be added back in later)
110
Who usually decides time to appoint A, and who usually appoints - why
QFCH time, Ds appoint - protects QFCH reputation
111
Why is a FCR not an LPA '25 receiver
Further powers
112
Why can QFCH essentially override any decision on choice of A
Interim period for court appointment + 5 days' notice if out of court
113
Under which kind of liquidation is the company solvent
Members voluntary liquidation
